Study Finds Raising Medicare Age Would Shift Costs

Raising Medicare’s eligibility age by two years would save the federal government $7.6 billion but those costs-and more-would shift to others, according to a report out today.

The analysis by the Kaiser Family Foundation says that increases in total costs for people 65- and 66-year-olds, employers and the state governments in 2014 would outpace the federal savings. (KHN is an editorially independent program of the foundation.)

The report assumed full implementation of the health law and an increase in Medicare eligibility to 67 in 2014.

The shift in costs include added out-of-pocket expenses for people who are 65 and 66 that year, higher retiree costs for employers and increased Medicaid costs for states.

The total out-of-pocket costs for 65- and 66-year-olds would increase by $5.6 billion while employer retiree health care costs would rise $4.5 billion, according to the report.

The increase in Medicare eligibility also would increase premiums by 3 percent for beneficiaries who stay on the program because younger beneficiaries would be removed from the risk pool. In addition, that shift would also raise prices 3 percent for all individuals who purchased coverage through the law’s health insurance exchanges, according to the analysis.

“Raising the Medicare eligibility age has a ripple effect for a variety of stakeholders,” said Tricia Neuman, who heads the Kaiser Project on Medicare’s Future.

Congress is wrestling with proposals to slash the deficit, and some of the plans have recommended increasing Medicare’s eligibility age as a way to reduce federal spending and extend the solvency of the program. A Congressional Budget Office analysis published earlier this month found that increasing Medicare’s eligibility age to 67 would save the federal government nearly $125 billion over the next decade.

For the estimated 5 million people whose entry to Medicare would be delayed in 2014, about three in four would pay an average of $2,400 more for their health care that year than they would have paid if they were enrolled in Medicare. The other quarter are expected to have lower out-of-pocket spending, mainly due to the health law’s expansion of Medicaid and the tax credits to help some Americans buy coverage on the exchanges.

The analysis predicts that 42 percent of 65-and 66-year-olds would receive coverage through employer-sponsored plans, either as active workers or retirees; 38 percent would get coverage in plans offered through the health law’s exchanges and 20 percent through the law’s Medicaid expansion for low-income adults.

Higher Medicaid expenditures also would increase states’ cost by an estimated $700 million to finance care for 65- and 66-year-olds who would otherwise be dual eligibles  covered by both Medicare and Medicaid  and for higher costs for Medicare premiums, according to the report. Medicaid pays the Medicare premiums for dual enrollees.

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Study Finds Raising Medicare Age Would Shift Costs

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